This paper reviews the current financial crisis with focus on securitization, causes of the crisis, current regulatory framework and the scope of Basel Committee and proposes possible measures regulating the financial sector. The process of securitization and its significance Securitization refers to the transfer of assets from an entity, the originator, to another entity that is set for such purchases with the aim of increasing the generator’s liquidity level. The generator, a financial institution, sells its debt assets to the third party who in turn, provides agreed amount of cash in exchange. The process of securitization incorporates a number of stakeholders. It begins with the financial institution that wishes to securitize its assets. The originator offers its assets to an issuer that must be an established entity for such a purpose and the issuer obtains rights over the assets. The issuer is further a native organization and acquires rights of the assets. Fundamental to the securitization process is the special purpose vehicle concept that transfers possession of the subject properties from the originator to the issuer and safeguards the issuer’s right over the property should the originator be declared bankrupt. The process also involves the concept of “credit enhancement” where a ‘non-privity’ party guarantees quality of the involved credit that is then rated before securities are offered. Issue of notes that are structured before they can be offered in the market (Choudhry, 331, 332) accompanies the security offers. The process of securitization identifies diversified benefits to both originators and investors. The process facilitates the originator’s liquidity level by through funding that is derived from owned assets. It therefore allows the financial institutions
Securitization, regulation, and factors contributing to the financial crisis Introduction Regulations and threats are some of the factors in a business environment and they play a major role in the financial sector that is sensitive to consumers’ interest and offers diversified and sensitive risks…
All the countries felt the affect of this global crisis but with different intensity. The impact of the financial crisis affected all the economies and hence challenged the incorporations and businesses to strive for their mere survival. The businesses with weak business models in this time were forced to shut down.
Banking Regulation and Risk. The 2008 financial crisis that started in the United States and immediately spilled over to many economies across the globe highlighted several problems that need to be addressed in the current financial system in order to prevent the same catastrophe from happening again.
CDS – Credit Default Swaps 6 5. Why economic models failed? 8 6. Case Reference – Perspective of HSBC Bank 8 7. Conclusion 9 8. References 11 1. Introduction Financial institutions cater to the needs of different types of customers by providing relevant financial services.
To explain the origin of these crises, I will start by explaining different phases of ‘The Great Bubble Transfer’, which led to speculative bubble in the home mortgage market. Under each of these phases, it will be explained how lax of regulation and other factors led to this crises.
The news that were most shocking was the filing of the bankruptcy protection by some of the major house mortgage lenders like New Century Financial Corporation that was regarded to be the largest in USA and Northern Rock that was largest in UK, filing of bankruptcy petition by Bear Stearns to bail out two of its hedge fund and at the same time JP Morgan Chase acquiring Bear Stearns, liquidation of Lehman Brothers with pre bankruptcy petition assets of value $700 billion, acquisition of Merrill Lynch by Bank of America, Federal Reserve Bank taking the control of American International Group (AIG) and Morgan Stanley and Goldman Sachs becoming the holding company of the bank (Mazumdar and Ahmad
Record numbers of people have lost their jobs in the past year and a half.
I have taken up the global financial crisis as my focus of discussion. The essay has been structured into three parts. The first part explains what recession is. The second part analyses the causes for this economic downturn and the third portion is where I have tried to provide some solutions that might help preventing the situation in the future.
l that is causing havoc across global financial markets is one that is just the beginning of a long crisis or one that will surpass quickly without a trail. The extent of damage that has been caused by market participants on Wall Street and in the government will only become
For tackling this government of various countries introduced various measures like bail-out, economic stimulus packages etc. The main cause of the crisis was attributed to the lapse in regulation. Therefore the main change required is the
avity of the problem is underscored by the length and the damage wrought by the slump, which some economists called as a recession and financial shock. In the effort of prevention, it is crucial to identify the causes of the financial crisis.
Technically, it was the collapse of
The artificial stimulation of the markets and businesses aimed at for overcoming the political instability in the form of global scenarios faced early in the 21st century was one of the factor which lead to an artificial environment creation and ultimately
4 pages (1000 words)Essay
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